Duna DefAi

Tax Report

Crypto Tax Analysis and Savings Report for 2025 for a Single Illinois Resident

Executive Summary

Based on your provided inputs, this report outlines the estimated tax liability stemming from your crypto transactions and income for the tax year 2025. A step-by-step process is utilized to first calculate your tax liability, then devise strategies to reduce taxes, recalculate savings, and advise on investment planning to optimize your after-tax profits. The ultimate goal is to lower your tax burden and maximize your net profit.

Step 1: Initial Tax Calculation

Inputs Provided:

  1. Short-Term Capital Gain (STCG): $396,136
  2. Long-Term Capital Gain (LTCG): $50,305
  3. Ordinary Income: $119,469
  4. Filing Status: Single
  5. Location: Illinois (State Tax Applicable)

Federal Income Tax Calculation (Ordinary Income)

Using the 2025 Federal Income Tax Rates for Single Filers:

  • $0 – $11,925 (10%): Tax = $11,925 × 10% = $1,193
  • $11,925 – $48,475 (12%): Tax = ($48,475 – $11,925) × 12% = $4,384
  • $48,475 – $103,350 (22%): Tax = ($103,350 – $48,475) × 22% = $12,073
  • $103,350 – $119,469 (24%): Tax = ($119,469 – $103,350) × 24% = $3,869.76

Federal Income Tax on Ordinary Income: $21,519.76

Short-Term Capital Gains Tax (STCG)

STCG is taxed at ordinary income rates (up to 37%). Adding $396,136 to your ordinary income of $119,469 gives a total taxable income for STCG of $515,605. Using the tax brackets:

  • $250,525 – $626,350 (35%): Tax = ($515,605 – $250,525) × 35% = $92,785.80

Federal STCG Tax: $92,785.80

Long-Term Capital Gains Tax (LTCG)

LTCG is taxed at preferential rates:

  • Income ≤ $518,900: Tax at 15%
    Tax = $50,305 × 15% = $7,545.75

Federal LTCG Tax: $7,545.75

State Taxes in Illinois

Illinois taxes income (including STCG, LTCG, and ordinary income) at a flat rate of 4.95%:

  • Tax = ($396,136 + $50,305 + $119,469) × 4.95% = $28,943.89

Total Taxes Before Strategies:

  • Federal Income Tax: $21,519.76
  • Federal STCG Tax: $92,785.80
  • Federal LTCG Tax: $7,545.75
  • Illinois State Tax: $28,943.89

Total Tax Liability = $150,795.20

Initial Profit After Taxes:

Crypto Gains (STCG + LTCG) = $396,136 + $50,305 = $446,441
Net Profit After Taxes = $446,441 – $150,795.20 = $295,645.80

Tax-to-Profit Percentage:

Percentage of gains paid in taxes = ($150,795.20 ÷ $446,441) × 100 = 33.77%

Step 2: Strategic Tax Saving Recommendations

To reduce your taxes, consider the following strategies:

  1. Tax-Loss Harvesting:
    Offset your STCG with any unrealized crypto losses. For instance, if you sell assets with $30,000 in unrealized losses, this reduces your STCG:

    • Estimated Tax Savings: $30,000 × 35% (marginal STCG tax rate) = $10,500

  2. Contribute to Tax-Advantaged Accounts:
    Contribute $6,500 (2025 limit) to a Traditional IRA or $22,500 to an employer 401(k). Contributions reduce your taxable income.

    • Estimated Tax Savings: $6,500 × 24% (ordinary tax rate) = $1,560

  3. Hold for Long Term Gains:

Delay selling short-term positions into 2026 to qualify for favorable long-term rates (0%–20%). Potential tax savings:

  • For every $50,000 held longer than one year, savings = ($50,000 × 35%) – ($50,000 × 15%) = $10,000 saved per $50k deferred

  1. Gifting Crypto:
    Gift $19,000 to a family member (2025 exclusion) per recipient. No tax trigger for either party.

  2. Charitable Donations (Direct):
    Donating high-appreciation crypto to qualified charities avoids capital gains taxes and offers tax deductions:

    • Fair Market Value Deduction = $10,000. Estimated Tax Saving = $10,000 × 24% = $2,400.

  3. Relocate to Crypto-Friendly States (Optional):

States like Wyoming, New Hampshire, or Florida have **zero state income tax**, potentially reducing $28,943.89 in Illinois state tax liability.

Step 3: Revised Tax Calculation

Revised Inputs:

Assume:

  • $30,000 of unrealized losses harvested from STCG.
  • A $6,500 IRA contribution.
  • $10,000 in charitable crypto donations.

Revised Federal Income Tax:

Revised Income = $119,469 – $6,500 = $112,969.
Recalculate taxes following the same brackets: $19,959.76 (reduced from $21,519.76).

Revised Short-Term Capital Gains Tax:

Revised STCG = $396,136 – $30,000 = $366,136.
Tax on $366,136 above thresholds: $82,285.60. Saved = $10,500.

Revised State Tax in Illinois:

Revised Taxable Income = ($366,136 + $50,305 + $112,969). Total: $529,410.
Illinois tax = $529,410 × 4.95% = $26,186.80 (Saved $2,757.09).

Revised Tax Liability Summary:

  • Federal Income Tax: $19,959.76
  • Federal STCG Tax: $82,285.60
  • Federal LTCG Tax: $7,545.75
  • Illinois State Tax: $26,186.80

Total Tax Liability (Revised) = $135,977.91

Revised Profit After Tax:

$446,441 – $135,977.91 = $310,463.09

Tax Savings Achieved:

Savings = $150,795.20 – $135,977.91 = $14,817.29

  • Percent savings = ($14,817.29 ÷ $150,795.20) × 100 = 9.82%

Step 4: Additional Investment and Tax Planning Tips

  1. Focus on LTCG-Friendly Trading Strategies:
    Shift short-term trades to long-term holding positions to leverage lower LTCG rates.

  2. Opportunity Zone Investment:
    Invest gains in Qualified Opportunity Funds to defer/reduce taxable gains.

  3. Diversify into Tax-Deferred Instruments:

Consider HSAs or annuities if applicable for further tax benefits.

  1. Optimize Charitable Giving & Gifting:
    Maximize deductions by planning annual charitable crypto donations.

Conclusion

By implementing these strategies, you can reduce your effective tax rate while optimizing your profit margins. Taking a proactive approach to tax planning can help you achieve nearly $15,000 in annual savings and ensure compliance with federal and state regulations.

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